Downloaded from Sedar (prospectus)
BUSINESS OF THE COMPANY
DESCRIPTION OF BUSINESS
Overview
Bid.Com is a sales and marketing company striving to become the pre-eminent online auction. The Company offers
auction services at its Web site and at other URLs using proprietary technology to create revenue opportunities in the
emerging electronic commerce (“E-commerce”) environment. The Company's business is a new, entertaining and
cost effective method of selling a wide array of consumer goods to businesses and retail shoppers in their homes and
offices via the Internet. Bid.Com's E-commerce technology combines both the brand name selection of a
department store and the value of a discount superstore with the excitement of declining price and rising price
auctions and the convenience and security of in-home online shopping. Bid.Com's Web site has been online since
April, 1996 and has progressed through developmental stages to revenue generation. In Bid.Com's declining price
auction, a starting price is set and a limited time period is allocated for a given quantity of product to be auctioned (3
to 5 minutes for most Bid.Com items). As time advances the price drops in pre-determined increments and once a
person registers a bid at the then prevailing price the quantity is reduced to reflect the sale and the process continues
until either the allotted time runs out or all items up for auction have been sold. Bid.Com also offers the more
conventional rising price auction, where the number of top bids purchase the corresponding number of items
auctioned over a period of hours or days.
The electronic retailing or “E-tailing” business of Bid.Com offers for sale a broad range of products, primarily
national brand name goods under full warranty, usually at lower prices than comparable traditional retailers. By
using interactive displays on the Internet as the distribution channel, Bid.Com eliminates the traditional retailing costs
associated with sales staff, store level management, store rent and maintenance, fixtures, merchandising and
inventory. Overhead costs of operation for Bid.Com are relatively fixed and following the expenditure of
approximately $700,000 over the previous twelve months for hardware and software development, management
believes that it has made most of the necessary investments in infrastructure to process anticipated volume increases
over the upcoming 12 months.
In general, the creation of E-tailing revenue is a function of increasing the number of people moving through the
Web site and increasing their propensity to purchase products. Web site traffic is increased through a combination
of strategic marketing alliances and advertising campaigns. The take rate of site traffic is improved by target
marketing specific product categories that are believed to coincide with particular interests of Internet users within
various topical channels or Web sites offered by online service providers. For example, the Company may promote
the sale of sports memorabilia to a sporting channel or Web site.
The Company's goal is to become a leading E-tailer and dominant provider of auction platforms on the Internet.
Online Auction is a trademark of the Company. Bid.Com has created a state-of-the-art E-commerce platform with
an engaging format, robust transactional backbone and efficient delivery system and intends to combine its
technology with the establishment of key marketing alliances to accelerate Web site traffic. Through the formation of
strategic alliances that provide substantial brand recognition and advertising carriage, plus the Company's own direct
advertising, Bid.Com intends to pursue market share growth and build a following of loyal online auction customers.
Strategic Alliances
The core strategic marketing alliances established by the Company to date are described below.
Bid.Com concluded an agreement with America Online, Inc. (“AOL”), the largest online service provider in the
world, to provide the Company's auction platform for goods and services offered to AOL subscribers. The
Company provides product procurement, transactional processing and order fulfillment services to AOL. AOL has
purchased 1 million Common Shares of Bid.Com and has a representative on Bid.Com's board of directors (the
“Board”). See “Material Contracts”. Bid.Com is currently working with other AOL companies to maximize this
strategic relationship. Management believes that its alliance with AOL is the cornerstone that will help it achieve
increased site traffic to achieve its business objectives.
Bid.Com launched a website in May, 1997 with an AOL branded interface, the AOL Online AuctionÔ. Sales in the
second quarter of 1997, which reflect the first three months of the AOL Online AuctionÔ, were $488,500 and in the
third quarter, representing the second three months of the AOL Online AuctionÔ, were $667,000. These initial
results were successful enough for Bid.Com to conclude a two year interactive marketing agreement with AOL
whereby the Company agreed to purchase advertising and promotion for US$1,250,000 per quarter with either party
having a right of early termination after the first year. This agreement provides Bid.Com with anchor tenant
positioning in a number of AOL's E-commerce offerings, plus ownership of various keywords such as “Online
Auction”. In addition, Bid.Com secured significant visibility and presence on AOL.com which is one of the most
visited sites on the World Wide Web. This aggressive promotional campaign of the Bid.Com Online Auction,
supported by substantial online advertising, was launched in March, 1998.
Bid.Com has also concluded an agreement with the Toronto Star Newspapers Limited (“Toronto Star”) to provide
local auction and cybermall services in the Province of Ontario. The Company will be providing transactional
processing and the Toronto Star will provide product procurement and order fulfillment to visitors of The Toronto
Star Online Auction and Cybermall branded site. Toronto Star, the largest circulation newspaper in Canada, has
purchased a total of 1.5 million Common Shares of Bid.Com and has a representative on the Board. See “Material
Contracts”.
Bid.Com entered into an E-Commerce and Promotion Services Agreement dated as at July 29, 1998 with Rogers
Media Inc. (“Rogers”) pursuant to which Bid.Com granted Rogers the exclusive right to co-brand the Canadian
Bid.Com auction, subject to the rights granted to the Toronto Star as described above and except for certain
charitable or “cause” marketing in which Bid.Com is involved (See “Business of the Company - Description of
Operations”). Rogers has agreed that the Canadian Bid.Com auction will be the only online auction displayed on the
home page of Rogers new E-Commerce portal and to be responsible for generating agreed levels of site traffic and
advertising revenues, as well as committing minimum levels of annual advertising on both media properties of
Rogers and its affiliates and arms-length media properties. Bid.Com also agreed to have a nominee of Rogers elected
to the Board. Rogers has committed in excess of $1,000,000 per year in media advertising to promote the
partnership. In a separate transaction, Rogers concurrently made an equity investment in Bid.Com. See “Private
Placement and Plan of Distribution”.
As described below, these core strategic marketing alliances provide Bid.Com with a foothold to take advantage of
the anticipated growth in E-commerce:
1) AOL is the world's largest online service provider with a subscriber base of over 10 million people (prior to the
anticipated acquisition of CompuServe with its approximately 2.6 million subscribers) and offers Bid.Com extensive
potential exposure to online consumers in the United States plus international growth opportunities. Over the next
two years, the Company believes that Bid.Com will become one of the highest visibility E-commerce partners in the
AOL community.
2) Rogers' national media properties include some of Canada's most widely read publications, Canada's only
television shopping network, a number of radio stations and several leading internet properties including Yahoo!
Canada, Quicken.ca, Electric Library Canada, Chatelaine Connects and Macleans Online. Rogers' parent company
also owns the largest cable network in Canada. The exclusive national partnership with Rogers leverages a number
of media properties to establish the leading online shopping destination in Canada as well as a number of trade
magazine resources to support the development of business-to-business online auctions.
3) The Company's relationship with Toronto Star is its first alliance focussed on territorially-based Internet content,
tailored to the local characteristics of a particular defined geographic region supported by a marketing mix of
newspaper, television and online advertising. Bid.Com anticipates a number of similar initiatives in major U.S. urban
centres over the next two years.
The Company expects to leverage the strong brand names and subscriber bases of its alliances as well as to invest
the substantial equity required to create Bid.Com's own brand recognition and customer confidence. These alliances
also increase traffic to the Bid.Com E-tailing sites due to advertising carriage arrangements which usually include a
combination of hyperlink banner advertisements and the directing of key words such as “Auction” and “Online
Auction” to the Bid.Com platforms.
These alliances have also demonstrated the speed and effectiveness with which Bid.Com can deliver custom branded
E-commerce solutions from a standing start to turnkey implementation. Bid.Com's platform and implementation
expertise now have strong endorsements from well known brand names. Steadily increasing distribution of the
Bid.Com E-commerce offering to a larger audience of Internet users while establishing exclusivity in certain
distribution channels is viewed by management to be a key success factor for the Company. The credibility of
Bid.Com's current strategic partners is also expected to accelerate the formation of future business alliances.
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